Women shun financial advisers in favour of money advice from robots

By Nina Hendy

Robo-advisers are reporting a substantial spike in the number of female investors, citing a "perfect storm" of the fallout from the banking royal commission and the empowerment of the #Metoo movement.

Six Park reveals that accounts held solely by women have more than doubled in recent months to sit at 40 per cent, up from 20 per cent in January. The firm delivers financial advice online using algorithms and technology in place of a human financial adviser.

Stacey Rice, 33, has invested her savings with robo-adviser Six Park.Credit:Joe Armao

The greatest number of Six Park accounts are held by 26-35-year-olds and 35-50-year-olds. Average account sizes are $31,761 and $43,342 respectively. Across all ages, the average amount invested by females is almost $55,000.

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It’s a similar story at fellow robo-adviser Stockspot, where one in three account holders are female, up from 20 per cent two years ago. New interest from women keen to invest via Stockspot has also grown by 65 per cent since 2015.

Some robo-advisers have been actively targeting women with specific marketing activities, some admitting the female market represents huge potential for growth. Raiz is another fintech investment company actively targeting female investors.

The robo-investors

Stacey Rice first turned to robo advice 18 months ago, making an 8 per cent return in her first year. The 33-year-old business analyst for a mining company started with a $5000 investment and has since topped that up to $13,000.

“My job is intense and I don’t have time to do research, but I still wanted to be exposed to investing and grow my wealth,” the Melburnian says.

“I typically like a buy and hold approach rather than short-term investing, so I plan to hold my account for around five years. I also have investments elsewhere so I don’t have all my eggs in one basket.''

There’s genuine frustration among women and this is flowing over into how they manage their money.

Sarah King, head of advice, Stockspot

Sydney’s Diana Abeleven has stashed nearly $25,000 in two robo-accounts since having her first baby in 2016. One account has grown by 12 per cent.

“I’ve dabbled in shares since I was 16, but when I became a mother that went into the too-hard basket. I didn’t like a financial planner because they’ve often got their own agenda and I didn’t have time to build a rapport with someone,” the marketing professional says.

She likes being able to log in and passively keep track of trades and flag investments she doesn’t like. “I put away kids' birthday money, financial gifts for the kids, my tax return and any discretionary spending that I won’t miss,” Abeleven says.

I didn’t like a financial planner because they’ve often got their own agenda and I didn’t have time to build a rapport with someone.

Investor Diana Abeleven

Robo-investing also appealed to 30-year-old Bec Martin, who has a robo-advice account worth $10,500. The Melburnian plans to reinvest any financial returns.

Martin, who works as a developer evangelist, describes herself as open-minded about the fintech space. She has a few other smaller investments in shares and this is the first time she’s invested in a dedicated investment product.

“I’m fully aware that these products aren’t day-to-day trading, and I’m forcing myself not to check the balance every single day. I want to keep the investment there despite market fluctuations and see where things are at in a year or so,” Martin says.

The perfect storm

Fear is one of the main reasons why women don’t invest, Six Park founder and CEO Pat Garrett says.

The fallout from the royal commission into financial services has raised fresh fears in investors’ minds. “Robo-investing removes that fear because it’s easy and online, which suits busy women who are working or looking after a family,” Garrett says.

“Women are doing their research and looking for new investment options outside the traditional ‘stick your money in the bank with the worst cash interest rates in history’,” he says.

Robo-advice sites leverage the Australian public’s passion for technology and may also have lower fees than traditional financial advisers. While a financial adviser could charge $1500 to prepare a statement of advice, implementing the advice might cost $1000, Canstar research shows.

Stockspot head of advice Sarah King says there’s been a perfect storm of influences driving interest from women. “I believe there’s a movement in the broader culture for women to take control of their finances that’s driven by movements like #MeToo and #Time’s Up.

“There’s also greater media coverage about the pay gap, women retiring with less super and the lack of female representation in politics, corporate brands and sport. There’s genuine frustration among women and this is flowing over into how they manage their money.”

Image woes

Just this week, Australian rate and review site for financial advisers, Advisor Ratings expanded to now list robo-advisers.

“There’s no question that the traditional financial advice industry today has an image problem, compounded by the findings from the 2018 royal commission,” says Mark Hoven, chief executive wealth at Adviser Ratings.

However, the digital advice sector is not without challenge, he says. “The large majority of providers are capital constrained, start-up fintech companies faced with the difficulties of building brand and scale to stand out in a crowded online world,” he says.

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Other challenges include building trust with consumers, protecting consumer data and managing increasing administrative burdens imposed by financial regulators, he says.

But robo-advice is working for Melbourne’s Price. “I definitely don’t think that a man should be a financial plan. Women always need their own safety net so they’re not relying on someone else.”